Fool: 27.7% yearly gainer ASML "best for long-term investors"
Prediction: ASML Stock Will Soar Over the Next 10 Years. Here's 1 Reason Why.
Story by Selena Maranjian • 17h
Key Points
- ASML specializes in lithography machines and technology.
- It sells large and costly systems that last for decades.
- Its future looks very promising.
Over the past 10 years, share prices of ASML (NASDAQ: ASML) have averaged annual gains of 27.7% -- enough to turn a $5,000 investment into a stake worth more than $57,000. How will the stock do over the next 10 years? Well, I think it will keep soaring.
Why am I bullish? Check out this sentence from Barron's: "The Dutch company has a near-monopoly on the specialized lithography machines used to produce the high-performance chips used in data centers, a business booming like never before."
ASML is a semiconductor company, and semiconductors are increasingly needed to fuel the growth of artificial intelligence (AI)*. Better still, it's by far the main company offering machinery that does the delicate work of etching intricate circuitry onto silicon wafers, and it's the only supplier of advanced extreme ultraviolet systems (EUVs).
Its equipment is costly and lasts a long time: According to the company in 2023, "Approximately 95% of ASML lithography systems sold in the past 30 years are still active in the field." The upside of that is that customers end up in service contracts for a long time, delivering fairly dependable revenue to ASML. There's a competitive advantage here, too -- once a semiconductor company has one or more costly ASML systems installed, it's not going to be eager to switch to another provider (if it finds one).
ASML's stock is even relatively fairly valued at recent levels, so it's well worth considering for your portfolio. Its recent forward-looking price-to-earnings (P/E) ratio of 33 is just a tad below its five-year average of 34. Its price-to-sales ratio is steep, though, at a recent 11. Its beta of 1.28 suggests it's 28% more volatile than the overall market -- so take note. It's likely best for long-term investors.
If you're bullish on semiconductors, you might want to be bullish on ASML -- so dig a little deeper into this company and its stock to understand its risks and opportunities.
*So many more EUV/ArFi chips than AI. Leaving out more than half the story, still compelling. |
